Small retailers face rising insurance costs

Insurance costs for small businesses rose during the last quarter, spurred by price increases in the retail sector.

However, according to one small business finance specialist, price is not always the most important thing when it comes to making sure your policy is easy to use.

Research from insurance comparison site BizCover.com.au shows that small business insurance rates increased last quarter, due largely to a jump in public liability index, with the retail sector driving the increase in costs.

The BizCover index for public liability and business packs in the retail sector jumped eight points over the last quarter, with the researchers highlighting that retail is a complex area to underwrite and there is less competition for this area of insurance in Australia.

“There has been a lot of discussion around insurers needing prices to increase to compensate for lack lustre financial results,” BizCover Managing Director Michael Gottlieb says.

However, given the competition across the insurance sector as a whole, Gottlieb believes insurers are unlikely to do hike pirces in the broader market, but might turn to areas like retail coverage for smaller operators as an area for pushing rates.

Stacey Price, founder of Healthy Business Finances, told SmartCompany while retail insurance is a unique area in Australia because it’s such a complicated area to navigate, too many of her SME clients can be too focused on the overall price of their insurance policies, rather than the coverage they get from them.

“A lot of people will just book insurance online—they’ll Google ‘insurance’ and the first one that comes up they will buy,” she says.

“They don’t understand what the policy is for, but because they’ve got it, they feel that they’re covered.”

Price says the most important thing for SMEs to determine when buying insurance for their retail businesses is if it will be easy to claim, and will cover all elements of their business in the worst case scenario—from stock in bricks-and-mortar stores, to things like postal insurance for their online business.

“They really need to understand what is covered, really go through the worst case scenario, and all the on-costs,” she says.

Price advises small operators on the lookout for new policies go to an independent advisor or broker first, rather than just relying on word-of-mouth recommendations. The diverse nature of retail businesses in particular can make it difficult to determine whether a friend or colleague’s coverage would be right for your business.

“I think the biggest thing is that people rely on advice from people who perhaps don’t have it right themselves. You don’t ask them why they have it, how they use it,” she says.

While the BizCover study suggests retail is an area to watch in the year ahead, insurance is an essential that all businesses need to get right, Price says.

“Often with the cheaper the policy, you’ll find the higher excess anyway,” she says.

The Financial Services Ombudsman reminds small business owners that often a majority of their wealth is tied up in the business they run, so working through proper research for insurance of that wealth is paramount.

Those with concerns or complaints about their policies or an insurer can lodge a dispute with the Ombudsman or contact their helplines for further information. Business owners can also see sample determinations from past complaint cases here.

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